Ruling next week in Stockton bankruptcy

SACRAMENTO (AP) — A judge said Wednesday he would not issue a ruling in the Stockton bankruptcy case until next week.

The announcement came as closing arguments began in the case that could lead to Stockton becoming the most populous U.S. city to enter bankruptcy.

Lawyers for the city have said Stockton has cut its budget and services to the bone and has no choice about entering bankruptcy.

The city's creditors counter that Stockton officials have failed to cut enough spending or seek a tax increase to avoid Chapter 9.

They complain that Stockton has not negotiated cuts in the money it pays into the state pension fund, which represents its largest debt.

They want to keep Stockton out of bankruptcy, which would likely allow the city to avoid repaying debts in full.

U.S. Bankruptcy Judge Christopher Klein indicated that he would not issue a ruling until Monday so he can go through the thousands of pages of documents in the case.

The city appeared to be riding high in the early 2000s with a growing population and real estate that tripled in value. Then the real estate bubble burst and home prices fell 70 percent, wiping out much of the tax base.

Within two years, Stockton had accumulated nearly $1 billion in debt on civic improvements; money owed to pay pension contributions; and the most generous health care benefits in the state.

Coverage had been provided for life for all retirees plus a dependent, no matter how long they had worked for the city.

The biggest share of the debt is held by companies that in 2007 insured nearly $165 million in pension bond obligations to allow the city a lower interest rate and to create stability for investors. The city proposed repaying 17 cents on the dollar.